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Britain can't abandon austerity for fiscal stimulus - EC
Britain's increasing debt burden and poor growth prospects means it cannot abandon austerity for fiscal stimulus measures, the European Commission has warned in its spring economic forecast.
Olli Rehn, the EU's economic and monetary affairs commissioner, warned George Osborne, the Chancellor, that there could be no question of relaxing unpopular austerity measures. Photo: PA
By Bruno Waterfield, Brussels
3:35PM BST 03 May 2013
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The Brussels analysis of the British economy warns that "growth improvements remain distant" amid high inflation faltering consumer spending, low investment and weak exports at the same time as government debt is growing.
Olli Rehn, the EU's economic and monetary affairs commissioner, warned George Osborne, the Chancellor, that there could be no question of relaxing unpopular austerity measures.
"The public debt level is projected to rise to close to 100pc next year and there is really no case for a discretionary fiscal loosening in the UK. It's important that the UK follows through with consolidation of public finances," he said.
European Union figures show that Britain's "gross" Government debt increased to nine tenths of the country's GDP last year and that borrowing will increase to 95.5pc of national wealth by the end of the year.
The debt increase is accounted for by low growth, "disappointing" tax receipts and the transfer of the Bank of England's Asset Purchase Facility, a liquidity operation, onto the Government's balance sheet.
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Next year, according to the commission, the "ratio of government debt to GDP continues to increase as a result of the higher deficit and lower growth with it reaching 98.7pc in 2014-15".
The commission is also bleak over the prospect of strong growth and a global economic upturn in exports coming to the Government's rescue ahead of elections in spring 2015.
"The outlook for 2013 is now somewhat more pessimistic than earlier in the year as higher-than expected inflation weighs down on consumer spending and an upturn in investment and net exports appears less likely," the report warned.
"GDP growth is forecast at 0.6pc in 2013 and 1.7pc in 2014 on a slowly but gradually improving basis."
Inflation, projected to reach almost 3pc this year, due to "higher than expected energy costs and food prices", is seen by the commission as threat to British growth prospects and the Governmentﾒs growth strategy.
"One major risk to the forecast is that the higher inflation, projected at 2.8pc in 2013, reduces consumer confidence and households begin to reverse their current spending trend," the forecast warned
The commission is also concerned that low exports, last yearﾒs figures were the weakest for a decade, pose a threat to Britain's faltering recovery. "Any upset in the euro area risks further worsening the trade forecast," the report said.
Britain's increasing debt burden and poor growth prospects means it cannot abandon austerity for fiscal stimulus measures, the European Commission has warned in its spring economic forecast.
Olli Rehn, the EU's economic and monetary affairs commissioner, warned George Osborne, the Chancellor, that there could be no question of relaxing unpopular austerity measures. Photo: PA By Bruno Waterfield, Brussels
3:35PM BST 03 May 2013
62 Comments The Brussels analysis of the British economy warns that "growth improvements remain distant" amid high inflation faltering consumer spending, low investment and weak exports at the same time as government debt is growing.
Olli Rehn, the EU's economic and monetary affairs commissioner, warned George Osborne, the Chancellor, that there could be no question of relaxing unpopular austerity measures.
"The public debt level is projected to rise to close to 100pc next year and there is really no case for a discretionary fiscal loosening in the UK. It's important that the UK follows through with consolidation of public finances," he said.
European Union figures show that Britain's "gross" Government debt increased to nine tenths of the country's GDP last year and that borrowing will increase to 95.5pc of national wealth by the end of the year.
The debt increase is accounted for by low growth, "disappointing" tax receipts and the transfer of the Bank of England's Asset Purchase Facility, a liquidity operation, onto the Government's balance sheet.
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Next year, according to the commission, the "ratio of government debt to GDP continues to increase as a result of the higher deficit and lower growth with it reaching 98.7pc in 2014-15".
The commission is also bleak over the prospect of strong growth and a global economic upturn in exports coming to the Government's rescue ahead of elections in spring 2015.
"The outlook for 2013 is now somewhat more pessimistic than earlier in the year as higher-than expected inflation weighs down on consumer spending and an upturn in investment and net exports appears less likely," the report warned.
"GDP growth is forecast at 0.6pc in 2013 and 1.7pc in 2014 on a slowly but gradually improving basis."
Inflation, projected to reach almost 3pc this year, due to "higher than expected energy costs and food prices", is seen by the commission as threat to British growth prospects and the Governmentﾒs growth strategy.
"One major risk to the forecast is that the higher inflation, projected at 2.8pc in 2013, reduces consumer confidence and households begin to reverse their current spending trend," the forecast warned
The commission is also concerned that low exports, last yearﾒs figures were the weakest for a decade, pose a threat to Britain's faltering recovery. "Any upset in the euro area risks further worsening the trade forecast," the report said.
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